How do you know if a stock is overvalued?

Relative earnings analysis is the most common way to identify an overvalued stock. This metric compares earnings to some comparable market value, such as price. The most popular comparison is the P/E ratio, which analyzes a company's stock price relative to its earnings.

How to detect overvalued stocks in the free market?

The most common way to detect such a list of overvalued stocks being traded in the free market is by doing an earning analysis taking the help of a P/E ratio analysis or price-to-earnings ratio analysis. This dimension brings about a sort of comparison by taking the most critical factor, which is the market value of stocks.

What is an overvalued company?

An overvalued company trades at an unjustifiably rich level compared to its peers. A small group of market theorists believes that the market is perfectly efficient, by nature. They opine that fundamental analysis of a stock is a pointless exercise because the stock market is all-knowing.